Risk Aversion Makes Us All Feel Ordinary

by Paul Hobcraft

It really depresses me when you hear the remark “actually, in all honesty, we have no appetite for innovation, we are so risk averse.” Actually it is heard a fair amount if you ask about risk and innovation. This is often never stated in earshot of others within the same organization, it comes in a sudden burst of honesty, perhaps over drinks, and always outside their ‘normal’ working environment. Sometimes you have a rare exception, especially if you have been called in to help, when someone has just been appointed into the position to simply “do something about innovation, we are dying as an organization”

We all need meaning but we don’t like the risks associated with it

I was reading an excellent article by Teresa Amabile and Steven Kramer on “How leaders kill meaning at work” and they offer the insight about the lack of recognition that everyone within any organization requires as the single most important need,that is the feeling they are making progress in meaningful work. Managers often undermine the meaningfulness of work to us as individuals; it is too often dismissed or not thought as relevant to the work at hand.

In the article they suggest four traps to avoid and one of them ‘Mediocrity signals’ triggered this blog. The organization they used as the example within this trap drove new-product innovation into the ground as the top management was so focused on cost savings they no longer were a leader in innovation, they simply became followers. One comment made by an employee was “mediocre work for a mediocre company”, yet it was not previously like that. Risk aversion had become dominating and the organizations leadership was signalling “they were really more comfortable being ordinary”.

How do we arrive at this point of being just ordinary?

Human being have always been risk takers, otherwise we would not be where we are today. As a species we survived because we took risks, but was this because we were threatened? There is a strong argument that we really only innovate when we are in crisis, being threatened, either with our jobs, within our organizations when we feel under attack.

So do we only feel we can take risks to survive? It is often amazing how the barriers are unlocked to innovation, within those deadlock meetings when someone signals “we can break the rules, we can go beyond our normal comfort barriers, into uncharted waters, it is acceptable, it will be supported”. We can change in seconds; it becomes liberating, exciting and risky.

The argument goes that risk-taking enables growth

We have all heard the mantra “without risk, there is no reward”. Yet the very opposite occurs more often than not. Those that do take a risk, often find their ‘reward’ is in being fired, demoted or being warned “this behaviour is not something we encourage in our organization”

So if you want to be an average manager or an average employee, then you need to find the average organization were little risk-taking is required. Does that fill our lives with meaningful work? I think there are better ways to go through life than hating the very thought of getting up and going into work. If we lack fulfilment, and being in an environment where work begins to have, each day, less meaningful purpose then we have taken out one of the major factors of life surely? If risk is being progressively taken out of the equation I think innovation suffers, let alone us as human beings having to live with this feeling of working in such a mind-numbing environment.

How often do we hear managers quantifying more on all the downsides of risk, looking at the possibilities of loss and less at the probabilities of success? Risk-taking becomes threatening to them, their tenure, so they work the downsides wherever they can, rework the product so it can still be innovative but is simply ordinary as against the original idea where it was potentially extraordinary. Risk aversion took hold and we are left with this “no appetite” and being ordinary.

We need a shift in risk thinking to help innovation

Organizations need to work at ways to reduce fear, discomfort and resistance. To allow for opposing views, seeking out a diversity of opinion and establishing that one thing we all would love to be part of, this is an authentic culture that matches the promise with the reality . One that shifts away from conventional thinking to embrace risk and not try to always control but to seek actively experimentation. It is through experimentation we gain our best learning. Equally experimentation should be at the core of every organizations drive to innovate, we accelerate our knowledge the more we attempt something different, proving or disproving is exciting work.

Shaping ideas, taking risks, allowing experimentation, providing tolerance, exploring the unknowns all should be an integral part of innovation. Innovation is risk-taking.

Kouzes and Posner back in 1987 suggested that individual’s be encouraged to keep trying despite failures, and focus more on on the learning from this than just simply from the outcome alone.

They suggested three points as a way forward to improve risk tolerance:

Choose tasks that are challenging but within the person’s skill level to build a sense of control

Encourage people to see change as full of possibilities and to build an attitude of change

Offer more rewards than punishments.

Over time this increases our risk-tolerances, we become progressively more creative in this risk-taking orientation to seek out and push for more innovation. We allow-in a greater desire for the capacity to be innovating and how we want things we are working on to improve, to give us a greater meaning within our lives. More purpose, more satisfaction, greater identification.

Equally allow those who are willing to take risk, as their more natural position, the head room to explore, to push boundaries. Outline the guidelines, expect them to be broken on a few occasions but work with them, talk with them and talk about what they are doing where ever you can. Work towards expecting more positive surprises through your engagement than fire fighting the negative ones because you were unaware. Do also make sure others above you or alongside you are party to the risks. There is a certain thrill in any ride if it has a little edge to it but equally it is in a successful finish. Risks always need active but positive managing, keeping them within a certain tolerance.

Building environments that encourage risk-taking should be sought

If we can provide environments that encourage risk-taking and they are consistent in what is expected this becomes a big step to change our present thinking about innovation. If the leaders within organizations lay out what they want to achieve, breakthrough innovation for example ,and this is clearly articulate and laid out in the governance, the culture and in the environment and linked to the purpose of the organizations goals, then risk becomes better managed and valued.

Risk-taking can come through experimentation, through more open learning and discussing, through testing and pushing for greater innovation alters the tolerance levels. These tolerances change over time as more confidence seeps into the way we evaluate and make the betting on the outcome more risk-rewarding. We begin to move back into truly innovating. As I suggested earlier: “innovation is about risk-taking”.

We look for a meaningful contribution as Teresa Amabile and Steven Kramer suggest. It boosts the “inner work life” and as they equally suggest “inner work life affects the bottom line” if employees are allowed to be engaged, part of something that allows them to be more creative, productive, committed and collegial in their jobs.

I would add fostering risk tolerance can push innovation beyond the ordinary back into the extraordinary. Nothing is better than being associated with extraordinary moments, we all need them, and they give us real meaning and purpose, just make sure you add a certain spice of risk into the mix. If you can’t live with risk, risk may come and live with you.

Paul Hobcraft runs Agility Innovation, an advisory business that stimulates sound innovation practice, researches topics that relate to innovation for the future, as well as aligning innovation to organizations core capabilities.

10 comments

Nice article, wonderfully written, fantastic sentiment, but you are not taking into account the variability of people and their attitudes towards their work. It is an idealistic vision you offer that does not always exist.

I agree in the idea of encouraging innovation, yet despite efforts, you see all the time individuals failing to capitalize on the opportunities of being innovative, and instead use such freedoms to game the system. Not all for certain, but more than a few.

It would have been an excellent component of your article had you covered such ground, and might have offered the readers a 360 view on the challenges, as well as the possibilities.

Paul, I can’t agree more with you on how important it is to take risks in order to be innovative. Only if you learn something you did not expect you are really moving into new territory. Most people call these experiences failures – I’d call them unexpected outcomes. In fact, the ability to learn from ‘failures’ and share this learning freely by widely talking about them is for me an indicator for an innovative culture in an organization. But when encouraging an organization to look for more unexpected outcomes counsel them to ‘fail’ cheaply and early in the project. Experiment more but do so in a ‘sheltered’ environment like a lab or a pilot.

It is a great pity Joachim that there are not a greater emphasis on experimentations, pilots, prototypes which provide learning experience with that skill that is looking to scale as and when proven. This again can be in stages not as one big bang. Large organizations go from small to full scale not recognizing the additional value of having a controlled exposure to a selected market or group of consumers can add so much more additional value from their use and insights. We are simply impatient to grab the ‘result’ irrespective

Hi Paul: Nice work, again. As someone whose business is tightly linked to corporate innovation efforts, I regularly experience decision avoidance that at least in part can be explained by risk aversion. The gloomy economy makes this even more common. Still, I am fortunate to work with some companies and people showing strong commitment to innovation. They make the contrast with risk averse people and companies even more vivid.

Yes I think your very personal model of attention, listening and understanding the needs of your clients shows you can go beyond normal risk into those committed as you share in their success. Thanks for your comments

Nice article. I currently manage a group of engineers performing tech dev. We have seperated tech dev from product development in order to reduce the risk in product development so that schedules can be determined early and met. Of course risk is paramount to determining paths in product development. THe question we always have is how much risk should you leave for product development to handle? After a couple of years of managing the tech dev group I think my answer is zero unfortunately, so my next project will probably need to take it completely over the finish line. Unfortunately this takes a lot of the fun out of the product development process. Developing something that is new has always been my key driver so I am sure it is the same for the product development folks as well. An interesting article on Ambedextrous Organizations by Charles A. O’Reilly III and Michael L. Tushman sheds some light on what kind of organization you might need to set up in order to take more risk.

Peter,
Thanks for your compliment. I think the Ambidextrous Organization offers some of the different thinking required. Besides O’Reilly and Tushman who put forward a good case, the alternatives on this make for further reading and then picking one that works for you. you have Vijay Gorindarajan and his Core & NewCo work, Clayton Christensen and his Process & Values four box grid, then Constantino Markides and his Conflicts and Importance Synergy four box grid and recently Birkinshaw and Gibson with their Adaptability and Alignment around Contextual Ambedexterity. If interested, then go and explore these alternatives.

I find value also in Geoffrey Moores approach for managing innovation found in his book Dealing with Darwin.

Managing risk from start to finish does tend to restrict and reduce the end result, usually for time and scheduling. Pity, I think some flexibility, mix and match, some engagement of different teams along the way instead of hand off makes for a richer and perhaps more enjoyable development but how this is managed becomes the ‘magic’. So I’d say some mixing up makes sense to put some fun back into the process